Main obligations and benefits of: law for the promotion of the use of renewable energies

Competent authority.

SIGET to authorise:

• Authorisation and registration for tax benefits.
• Inspections or verifications of consumers' installations.
• Impose sanctions on distributors.

However, the Directorate of Mines and Hydrocarbons must give SIGET approval for the following powers:

• To issue the special regulation and tariff schedule.
• Establish the catalogue of systems or equipment that meet the requirements and technical characteristics for supply.
• Adapt the regulations, technical standards and other provisions issued to implement the provisions of this Law.

The right of end users to a connection to the distribution network and to be paid for the excess.

The right of all end users of the electricity supply service to continue to receive it through a connection to a distribution network in a conventional manner, and to supplement their supply or replace it through the implementation of systems and equipment, is recognised.

This law will also regulate in a tariff schedule the tariff at which the distributor must recognise surplus electricity injected into the distribution network.

Tax incentives for end users.

End users who purchase their systems or equipment from a supplier benefiting from a Qualification Agreement or who contract the respective installation or maintenance services will be exempt from the tax on the transfer of movable goods and the provision of services in such contracting.

End users shall also be entitled to deduct from their taxable income what they spend on the respective purchase and installation for the tax year or period in which they carry out the operation. In order to prove the deduction, the end user shall attach the tax document issued by the benefited supplier at the time of purchase or installation of the equipment.

Suppliers

Natural or legal persons whose business activity corresponds to the sale, supply or installation of systems or equipment intended for end users to receive their electricity supply.

Incentivised activities for suppliers (art.7)

• Importing, selling or marketing electricity generation systems or equipment produced by conventional or non-conventional renewable sources.
• Acquisition and installation of the aforementioned systems and equipment for self-consumption by end users.
• Maintenance services for the aforementioned systems and equipment.

Tax incentives

• Total exemption from income tax on the income received from the incentivised activities.
• Exemption from all types of income tax withholdings in respect of the incentivised activities.
• Total exemption from the Tax on the Transfer of Movable Goods and the Provision of Services (VAT), which shall apply to local transfers of goods and provision of services set out in Article 2 of this Law. Suppliers making sales of goods or services to end users shall not be obliged to apply the proportionality of the tax credit referred to in Article 66 of the Law on VAT on Movable Goods and the Provision of Services, which shall apply to local transfers of goods and services set out in Article 2 of this Law.
• on Movable Goods and the Provision of Services. Total exemption from taxes and levies on imports and imports, especially those related to Import Duties (DAI), including the Tax on the Transfer of Goods and Furniture and the Provision of Services (VAT), for the period that they carry out operations related to the scope of this Law, of machinery, equipment, tools, materials, spare parts and accessories, utensils and others, necessary for the sale, supply or installation of the systems or equipment destined for end users; All of which shall be applicable only to goods whose use is indispensable for the development of the works that are the object of this Law.

Duration: ten years while they have the supplier qualification agreement with Siget.

Requirements to apply for the incentive

• To be registered with the Salvadoran tax authority, which will be accredited with the applicant's Tax Identification Number.
• Be a taxpayer of the Tax on the Transfer of Movable Goods and the Provision of Services (VAT), which must be proven with the Taxpayer Registration Number (NRC) card, which establishes their economic activity related to this Law.
• Be solvent or authorised to comply with its tax obligations.
• Prove that their activities are included within those established in the present article and receive the corresponding Qualification Agreement from SIGET.

Article written by Alejandro Muñoz, partner of Activos Digitales de ECIJA El Salvador.